Quarterly markets review - Q4 2016

An overview of markets in Q4 2016 when the US presidential election dominated the news and bond yields generally rose.

6 January 2017

Investment Communications Team

Investment Communications Team

  • The fourth quarter saw government bond yields rise amid expectations for higher inflation after the US election victory for Donald Trump. Equity markets generally gained, with financial stocks performing well.
  • US equities advanced and macroeconomic data largely improved. The quarter was dominated by the presidential election and the Federal Reserve (Fed) raised interest rates.
  • Eurozone equities made gains. Financials performed well amid higher bond yields and the European Central Bank extended its quantitative easing programme.
  • UK equities also moved higher, supported by financials while resources stocks performed well after OPEC agreed to cut oil production.
  • Japanese stocks were strong, drawing support from the currency as the yen weakened in November and December.
  • Emerging market equities underperformed, posting a negative return owing to uncertainty over US trade and foreign policy, as well as the prospect of tighter US dollar liquidity.
  • Government bond yields moved higher and yield curves steepened. Global corporate bonds generated negative total returns but outperformed government bonds.

Important Information: The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.